Which of the following statements concerning net income is most correct?
A) Net income represents cash available to pay dividends.
B) Net income represents sales minus operating expenses at a specific point in time.
C) Negative net income reduces a company's cash balance.
D) Net income represents income that may be reinvested in the firm or distributed to its owners.

Question

Quizplus · Accepted Answer

Net income is the amount of profit a company earns after subtracting operating expenses from revenues. This profit may either be reinvested in the firm (as retained earnings) or distributed to the owners (as dividends). Option A is incorrect because net income does not necessarily represent cash available to pay dividends. Option B is partially correct but does not include all components of net income. Option C is incorrect because negative net income reduces the retained earnings balance, but this may or may not translate into an immediate reduction in cash balance.

Which of the Following Statements Concerning Net Income Is Most